The Pound has strengthen across the board over the past few weeks for a number of reasons, and the gains against the Aussie have been some of the most pronounced when we compare the Pound against all other major currency pairs.
In terms of UK (and therefore Pound) specific news, sentiment surrounding the economy has been boosted since the election victory of Donald Trump as the US President Elect has previously discussed the special relationship between the US and the UK in public. During the Brexit vote build-up President Obama has suggested that the UK would be at the back of the queue if the electorate voted to leave, so Trump’s sentiments appear to be far better for the UK economy moving forward. Trump also has a number of UK interests and his strengthening relationship with Nigel Farage appears to be a good thing for the UK, so far at least.
Prior to Trumps election the Pound was buoyed after the High Court ruled in favour of the Brexit initiation process needing parliamentary approval before it can begin. Those that have been following the Pound this year will be aware that any talk of ‘Softer Brexit’ is usually Sterling positive with talk of a ‘Hard Brexit’ being Sterling negative.
The ruling, which resulted in Sterling strength as previously mentioned, was immediately appealed by government and I expect the outcome of the appeal to impact Sterling rates, with the Pound gaining even further if the appeal is rejected in early December.
The Aussie Dollar is also likely to come under pressure as interest rates in the US are likely to increase now the election is over. Investors have been holding funds in the higher yielding currencies such as the Aussie Dollar as they offer one of the highest interest rates in the developed world, but that demand for Aussie Dollars is likely to weaken if US interest rates are hiked so those with a currency requirement involving the Pound and the Aussie Dollar should pay close attention to how the FED Reserve Bank of the US acts.
Tomorrow one of the main events of the week for Sterling exchange rates will take place. The Autumn Statement will detail to the marketplace the details of the heavy borrowing Philip Hammond has hinted at since the Brexit vote so expect to see volatility between the GBP/AUD exchange rate if any major hints are made.